Corporate Futures

Can corporations contribute to positive change in the world? Or are they inevitably a part of the problem? YES! executive editor Sarah van Gelder invited Paul Hawkenand David Kortento a discuss this question.

SARAH VAN GELDER: You both seem to agree that a market economy is the best possible system for a number of reasons centering on the creativity, flexibility, resilience of the market, and its capacity to harness human ingenuity. You speak about capitalism in very different ways, however—David describes it as a cancer on the market system, while Paul has been giving the term a new twist by suggesting that capitalism is a good idea, we just haven’t really tried it yet. Are these differences in definition, or are there some real underlying disagreements?

DAVID KORTEN: I suspect definitions are the key here. So far as I am aware, Paul, the major difference between us is that you have chosen to focus on changing the system of business from within, while I’ve chosen to focus on working with citizen movements.

Sarah rightly points out, however, that we have substantial differences in how we use the term capitalism. By my understanding, the term came into use in the mid-1800s to refer to an economic and social regime in which the ownership and benefits of capital are appropriated by the few to the exclusion of the many who through their labor make capital productive. This seems to describe all too well the reality of the present global system of business.

I’ve chosen to take on the role of the small boy in the story, “The Emperor’s New Clothes” and break the embarrassed silence to affirm that capitalism is about naked greed and is the mortal enemy of markets, democracy, and ethical values. It turns out that this is a very empowering message for most people as it affirms what they have suspected to be true all along.

I am guessing, Paul, that since you are working to win over leaders within the system who have an almost religious attachment to the term capitalism, you find it more effective to embrace the term, while making the case that what we need is a "different kind of capitalism." Working with different constituencies may require the use of different language, even when the ultimate goal is much the same.

PAUL HAWKEN: Capitalism as conventionally defined is a system where the means of production are privately held rather than being in hands of the state. I agree with David that financial capitalism, the capitalism that is in place and practiced, is bizarre and cancerous.

Capitalism arose from industrialism without any particular framework or values. It was sometimes given lofty virtues by observers, much as conservatives do to this day, but social and environmental values were never intrinsic. Capitalism simply emerged. No one said, wouldn’t it be cool to have a juggernaut economy of unprecedented productive capacity that destroys the capacity of every living system on Earth, where over 90 percent of the world’s wealth would be concentrated in the hands of 2 percent of the people, and the other 98 percent wouldn’t mind because they were being anesthesized by shopping or the eventual prospect of having more material goods. My comment that capitalism might be a good idea is a rhetorical jab at the extreme internal contradictions of the present system. It is, in Hazel Henderson’s words, a system where the divine rights of kings have been replaced by the divine rights of capital (money).

It is true that I work with corporations, but only in an educational role. I try to inform them, just as I do with my writings. It is always a surprise that a few corporations listen. The number who are truly receptive can be counted on one hand. I am constantly confronted with skepticism and resistance. What little effect I do have is because David and many others are working from the outside. The main reason most companies accept the need for change is because the alternatives are worse. Usually, those alternatives are being fashioned by citizen groups who are addressing corporate hegemony and arrogance through numerous initiatives including boycotts, protests, teach-ins, community activism, shareholder resolutions, Web sites, etc.

But I think David and others working in the area of globalization raise a very important issue. Are corporations as they are constituted reformable? Certainly, there are specific companies, as I mentioned in the Ecology of Commerce, that should be grounded and have their licenses taken away. They have such miserable historical records that, were they individuals, they would have been jailed years ago. But putting aside the true miscreants, can "normal" transnational corporations perform an honorable role? Almost every fiber of my being says no. Yet they are here. That is the dilemma. In this area, I believe David’s work is far more important than my own.

I am certain of only one thing; that business as we know it is destroying the Earth including all cultures and living systems, and never before has there been a system so ubiquitous, so destructive, and so well managed. It is our creation.However, I don’t work to win over corporate leaders. I am a terrible salesman and a worse diplomat. Companies still get angry when I give speeches. I gave a keynote in San Diego recently where the person who introduced me was so apoplectic at the end of my talk he wouldn’t speak to me and complained bitterly to the program chairman who had invited me. There are a few CEOs who have changed their corporations rather dramatically and have credited me, which is very kind, but in every case these are people who were already true visionaries and just needed some good information.

SARAH: Paul, I don’t think you’re giving yourself enough credit. Influencing a handful of business leaders, indeed! Here is my second question: Where do you see opportunities for change? Gandhi spoke of two parts to a strategy for change—resisting what’s not working and creating the new. Do you see evidence of hope in either or both of these areas? Particularly, do you see ways to go beyond making some modifications at the edges to a shift in the entire dynamic?

DAVID: I have to agree with Sarah that influencing a handful of corporations is an important accomplishment. An effective strategy for change as profound as that we now face must involve many approaches. One among them is to put to a serious test, with an open and honest public accounting, the proposition that the existing system provides corporations the scope to take the lead toward creating a socially and environmentally viable economy.

Ever since I heard about The Natural Step, it struck me that it was a vehicle for providing just such a test because it sets high and uncompromising standards. Paul, you brought The Natural Step to the United States and invited widespread corporate participation. While I’m not surprised to learn that few responded, that information is an important contribution toward a realistic assessment of the often heard claim that corporations will lead the way to social and environmental health if government will just remove the regulatory barriers that hamper responsible behavior.

With regard to your question, Sarah, until we have a reasonable idea of where we want to go, we are unlikely to get there. I believe we need to move toward a mindful market economy—one that is self-organizing, democratically accountable to all people, rewards productive behavior, provides a decent means of livelihood for every person, encourages ethical behavior, and functions in a balanced and sustainable relationship with the other living systems of our planet. In short, it is an economy that is nearly the mirror opposite of a global economy centrally managed by global corporations larger than most states in response to the demands of financial speculators who make no contribution to productive output.

So far as I can see a mindful market economy has no need for institutions created for the sole purpose of enriching the already wealthy and concentrating economic power without democratic accountability. The problems arise from a combination of size, ownership, and accountability and are best resolved by replacing the global publicly traded, limited liability corporation with human-scale, stakeholder-owner enterprises that are accountable to the communities in which they are located. Nor is there any place in such an economy for financial speculation.

Eliminating financial speculation and the corporation as we know it will not solve all our problems, but it would be a good start. Unfortunately, such an agenda seems rather fanciful given current power realities. On the other hand, given the rate at which our existing economic institutions are destroying life to make money, our very existence depends on turning a seemingly impossible agenda into a feasible and obvious choice.

PAUL: The global industrial system is both megalithic and fragile. I suppose I see it in a Dickensian way, with both the best and worst becoming more manifest. The worst we hardly need to talk about. As to the best, worldwide, there are tens of thousands of NGOs that are addressing the issue of sustainability in its broadest and most complete sense. Domestically, my guess is that there are some 30,000 groups. They address a broad array of issues including environmental justice, ecological literacy, public policy, conservation, women’s rights and health, population, renewable energy, corporate reform, labor issues, climate change, trade issues, ethical investing, ecological tax reform, water, and much more. These groups conform to both of Gandhi’s imperatives: Some resist while the others create new structures, patterns, and means.

The groups tend to be local, marginal, poorly funded and overworked. It is hard for most groups not to feel that they could perish in a twinkling, and a palpable sense of anxiety is there. At the same time, there is a deeper pattern that is extraordinary. Around the world, organizations working on sustainability are creating conventions, declarations, lists of principles and frameworks that are remarkably in accord. These include the CERES Principles, The Natural Step, Agenda 21, the UN Charter on Human Rights, the Cairo Conference, The Siena Declaration, and thousands more. Never before in history have independent groups from around the world derived frameworks of knowledge that are utterly consonant and in agreement. It is not that they are the same, it is that they do not conflict. This hasn’t happened in politics, not in religion, not in psychology, not ever. As external conditions continue to change and worsen socially, environmentally, and politically, organizations working towards sustainability increase, deepen, and multiply. Some day, these dots are going to be connected.

Business reform and restorative economics is only a part of this broader movement towards change. But it is critical.

It is frustrating to see the juggernaut of corporatism continue to concentrate ownership in the media, energy, transportation, publishing, apparel, and so much more and not feel like power is being swept away and sequestered into the hands of the few. Although the rate of corporate change is accelerating now, sometimes you have to bite your lip when you see what passes for change. Is an institution making a legitimate effort to transform its culture and direction or are they just standing on the first rung of the ladder for a better view? Sometimes, even they don’t know it is all so new and bewildering. When you get an organization like Monsanto completely prostituting the concept of sustainability, that understandably raises the level of cynicism as other corporations announce that they are moving in that direction.

We are talking about some very entrenched and highly reinforced paradigms that have been drilled into the head of every MBA in America, not to mention overseas. It isn’t easy to change. Even CEOs who do understand sustainability extraordinarily well, like Ray Anderson, say that they have a difficult time being understood by other CEOs. Those barriers permeate the organization, not just top management. Nevertheless, it is the executive suite that poses the greatest barrier. Short attention spans, gnawing stress, compensation incentives (which are all essentially short term), ecological and biological illiteracy, investor demands, peer pressure, glass ceilings and gender bias (we are talking about a profoundly male view of the world), political conservatism, all create a formidable wall of resistance.

I agree with David’s view that we are goal-less. What are the goals of corporate America? Strip away the platitudes and what do you have left?

One of the most humorous aspects of teaching The Natural Step in corporations is when you come to the Fourth System Condition, the part that says that without social justice and fair and equitable distribution of resources, there can be no such thing as sustainability. Businesspeople go ballistic. They think it is socialist, communist, the nose of the leftist camel slipping under the tent. Literally, some are repulsed by it. We are in a country that was founded on "liberty and justice for all" and if you raise that issue in the business community, some executives will fall off their chairs. Sometimes, I have asked business people who reject the notion of social justice whether they believe in injustice, inequality, lack of opportunity for women, and unfairness. They protest just as vehemently. So then I ask them what do they believe? What do we believe? What are our goals? It seems to me that our goals have been money—period. We got it. Not very well distributed, but goodness there is a lot of money moving around. So the good news is that when Americans set a goal, they usually achieve it. The problem is that we have such insignificant and petty goals.I am going on too long here, but maybe a story will suffice. In one of these monolithic and highly resistant corporations which shall remain nameless (but let’s just say that I doubt if the readers of YES! use one single product from this $9 billion behemoth), a friend was giving a one-day workshop to middle management on sustainability. Now this group had already rejected the Fourth System Condition about social justice and resource equity. They were given an exercise that we do in some of our workshops. Their task was to break into five groups, with each group designing a spaceship (size and propulsion were not issues, and it could receive sunlight from the outside) that would leave the Earth and bring its inhabitants back, alive, happy, and healthy 100 years later. Being engineers, they loved the challenge. At the end, they would vote on which spaceship they would want to travel on, and that would be the winning group.

The winning spaceship was brilliantly designed. Now bear in mind, this company, amongst many other things, makes pesticides and herbicides. Things that kill life, i.e. biocides. On the winning spaceship, they decided that they needed insects so they decided that they would take no pesticides. They knew that photosynthesis was key to their survival. They also decided that weeds were important in a healthy ecosystem and banned herbicides on board. Their food system, in other words, was totally organic. This group of engineers and MBAs also decided that as a crew, they needed lots of singers, dancers, artists, and storytellers, because the CDs and videos would get old and boring fast, and engineers alone did not a village make. There were many more aspects, but two were most interesting. One, they decided that virtually none of the products they were making on Earth would be useful on this spaceship. And, at the end, they were asked if it was OK if 20 percent of the people on the spaceship controlled 80 percent of the resources on board. They immediately and vociferously rejected that notion as unworkable, unjust, and unfair. And then they realized what they had said. In other words, in small groups with appropriate goals and challenges, we know the right things to do. As a society within the world of capitalism, we are not very bright.

SARAH: Since Paul worked closely with Monsanto for some time and David has met and corresponded with CEO Robert Shapiro, I wonder if you could both reflect on your experiences with Monsanto. What was accomplished and what was behind the company’s interest in sustainability?

PAUL: OK, here goes:Like many others in the environmental movement, I was invited to St. Louis to present issues about sustainability. Although I refused initially, I accepted reluctantly for a simple reason: if Monsanto could change, then any company could.

As far as I can see, there has been little or no change. Whatever plans and products they had in their pipelines came right on through. I don’t know of any new products that came about because of any environmental commitment, and the old underlying divisional culture of ramming products into the marketplace without consulting a broader stakeholder community about effects, values, science, and other potential concerns—with the arrogance that entails—remains intact. What exists now is a company without any clear leadership, with divisional heads consistently putting their foot in their mouth, and a product line that is truly unnerving.

I continue to follow their devolution, especially in Europe where they have become the most reviled American corporation. No small achievement.

It is hard to say, looking back, what their interest in sustainability was. I am assuming that they believed that genetically modified organisms were more sustainable, and that they were looking for some sort of intellectual bulwark to support their life sciences approach. They never found it of course, and have largely dropped their sustainable development division and any pretense that sustainable is a word or concept that informs their activity.

DAVID: Paul, I strongly share your perception regarding the importance of the convergence of values and visions among citizen groups the world over. We are witness to the emergence of a new form of global leadership from below, grounded in a love of life and a capacity for deep compassion. It points to a powerful, soulful awakening that is our primary source of hope for the future.

By contrast, I’ve come to realize that those who look to the soulless legal instrument of the corporation as a source of leadership toward restoring the life of planet and community look in the wrong place. The corporation is a creature of money, not life, and as such it will always put money’s interests ahead of life’s interests.

I was fascinated by your story about the space ship design exercise. To me it underscores a profound finding from the new biology that just as living beings have a natural drive toward self-preservation, they also have a natural drive to identify with the interests of the larger living communities on which their own function depends.

When corporate executives identify with the interests of the artificial legal entity of the corporation that employs them, they almost inevitably embrace the values and world view embedded in its legal structure. In this context, concerns for equity and social justice appear alien, naive, and even subversive.

Yet when these same executives engaged in the design exercise, their point of reference shifted from the corporation to the spaceship and its inhabitants. At least temporarily, their values and world view shifted accordingly—even without their noticing it. Instead of focusing on what will make money, they focused on what is necessary to sustain a healthy living community—a wholly different perspective.

Which brings me to your question, Sarah, about Monsanto, the current poster child of corporate irresponsibility. While I had far less contact with them than Paul, I did have meetings in 1996 with a number of Monsanto’s top managers, and in 1997 had a private breakfast with Shapiro. They impressed me as wonderful people who seemed deeply committed to using the resources of Monsanto to create a better world for all.

But what can you do when you are running a multi-billion dollar corporation that makes not a single product that any sane individual would want along on a spaceship journey and are accountable to a fickle stock market that has doubled the price of your stock during the previous year in the expectation that your sales of genetically engineered products are going to generate rapidly growing profits?

If Monsanto were the only corporation prone to advance its interests with a reckless disregard of the human and natural interest we could simply close it down and be done with the problem. Unfortunately, the Monsanto case is of interest largely because it reveals with such startling clarity how corporate life leads good people to do terrible things. It is a reminder that so long as we work in the employ of a publicly traded corporation, we are paid to generate ever growing stock prices for corporate shareholders without regard to any other interest—including such fundamental interests as the genetic integrity of planetary life and the survival of the species.

SARAH: Where do you feel the least certain about your own work and about prospects for the future? What keeps you up at night? And what have you observed that gives you hope? Where do you plan to put your own efforts toward a more just, sustainable, and compassionate world?

DAVID: I see a growing popular sense that corporations and financial markets are running out of control in highly destructive ways. This is especially true in Europe and many parts of Asia, where people are far more aware of the global financial crisis, because they are closer to the consequences. Because the US so dominates the global financial system, we have so far been able live in splendid isolation, passing the burdens of our failed economic policies onto others and then blaming them for the failures these policies have caused.

I believe the key to change is to help people see that there are real alternatives to global capitalism and that these alternatives have nothing whatever in common with Soviet-style communism or other forms of state domination. The idea that our only choices are between rule by unaccountable corporations or unaccountable states is nonsense.

Real markets aren’t vicious gladiatorial arenas in which only the biggest and most ruthless survive. They are places where people engage in productive exchange with a mindfulness of their own needs and the needs of the larger community in which they live—the mindful markets I mentioned earlier. Mindful enterprises are owned by real people who function simultaneously as entrepreneurs, workers, and community members. They operate small farms and bakeries, local convenience stores, health food stores, the local hardware or appliance store, and community oriented bookstores and coffee shops. They love their communities and their work and are proud to provide good service at reasonable prices.

My own favorite example in the neighborhood where I live is the Bainbridge Island Winery, owned and operated by the warmest, most generous people imaginable. They tend the Earth and the grapes with loving care, produce fine wines, and sell them only from their winery shop so that they come to know their customers, who in turn make a connection between the wine they drink and the land and the people who produce it.

I believe we are seeing the emergence of a new consumer consciousness, a preference for wholesome, locally grown organic foods, and for the producers and merchants who are rooted in their communities and care about a healthy social and natural environment—human-scale, stakeholder owned, and accountable. My own energies are increasingly directed to helping people recognize and nurture such alternatives and to identifying the critical leverage points by which we can transfer energies from the institutions of global capitalism to the institutions of mindful markets.

PAUL: I guess what gives me great foreboding is the prospect that we may in fact be in the middle of what Peter Schwartz calls "The Long Boom" in which economic growth will continue to rocket for years to come, fortunes be piled upon fortunes, where 35-year-old entrepreneurs have a personal net worth of $5 billion because they figured out a way to auction off used Pez dispensers and howitzers on the net, and sage pundits call this the "new economy." Already, a nouveau monetary class is crowding the airwaves and newsstands with the kind of apolitical libertarianism you see in Wired, a world in which it will be very hard to discern values of any kind. It is a world where we can become just too clever and hip and cool and find ourselves at the edge of nowhere, dressed to kill, talking on our cell phones, irritatedly waiting for something even newer than what was new yesterday because novelty is the only thing left by which we define ourselves. It doesn’t bother me that these things exist, but what keeps me up at night is how growth, money, polarization of income, concentration of power, corporatization of media, and other forces in play will vanquish the breathing space human beings need for discourse, debate, reflection, and democracy.

What is most hopeful in the world today is what is least visible. With the exception of Ray Anderson and a handful of others, I don’t see a lot in the corporate arena that is hopeful. I say that just as many companies are becoming more transparent, agreeing to redesign products, embracing sustainability, and more. But there is a powerful dilution of the vision of sustainability that is occurring, and as yet, the incapacity to accept responsibility—in some cases, even culpability—for what we have before us.What I find hopeful is the work of activists; small, local and bioregional NGOs; environmental educators; the men and women who steward our parks and wild refuges; the newly awakened citizens who finally realize that they are downwind and downriver. I find hope in the steadfastness of spirit that can be seen in the indigenous communities. I see vibrancy in a broad array of citizen movements here and around the world. I see hope in what many think is a pessimistic assessment, that change will not and cannot occur from the center, from Washington, from Wall Street.

I believe we are undergoing a far greater evolution than what is being paid lip service to. I believe we are only seeing the very rudiments and beginnings of that change. I do not expect many of our institutions will exist 100 years from now. I don’t say that apocalyptically, only in that I believe they will be abandoned and replaced as people vote with their hearts and feet. The university, the church, and the government have all failed to provide the knowledge, inspiration, and leadership people need to move coherently as a society to a social good.

I have done three things to try to address the damage businesses do. I wrote and talked extensively about the Ecology of Commerce, I brought to this country The Natural Step and helped establish it, and have co-authored Natural Capital(ism)with Amory and Hunter Lovins of the Rocky Mountain Institute. For me, that may be enough. I want to work with people who do not use money to measure anything, especially their life. I want to work where there is more heart and less greed; more laughter and less pride; more options and no stock options.

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Paul Hawken is a founder of The Natural Step - US, the author of The Ecology of Commerce, co-author of Natural Capitalism, and a YES! editorial advisor. www.paulhawken.com

David Korten is author of The Post-corporate World: Life After Capitalism and When Corporations Rule the World. He is also president of the People Centered Development Forum and the chair of the Positive Futures Network, publisher of YES!